Revenue-based financing is moving from US and European fintech decks into Vietnamese boardrooms. A SaaS founder in Ho Chi Minh City, an e-commerce brand on Shopee and TikTok Shop, a Hanoi F&B chain and a generic pharmaceutical distributor all share the same problem: they have predictable revenue but little hard collateral, and they do not want to sell equity at today’s valuation.
Revenue-based financing offers capital repaid as a percentage of revenue until a cap is reached. In Vietnam, however, the legal label on that cash decides almost everything: tax, licensing, interest ceilings and enforceability.
Contents
- What Is Revenue-Based Financing and Why Does It Appeal in Vietnam?
- Use Cases: SaaS, E-commerce, F&B and Pharma
- Characterisation: Loan, Investment or Royalty Licence?
- Interest-Rate Caps and Usury Exposure
- IP Licence Registration and Royalty Withholding
- Offshore Funders and SBV Foreign Loan Rules
- Caps, Multiples, Covenants and Reporting
- Comparison with Venture Debt and Convertible Notes
- Enforceability and Security
- Frequently Asked Questions
What Is Revenue-Based Financing and Why Does It Appeal in Vietnam?
Under a typical revenue-based financing deal, a funder advances a lump sum and receives a fixed percentage of the company’s monthly revenue, commonly in the low single digits up to the mid teens, until it has collected an agreed multiple of the amount advanced. There is no fixed maturity and no board seat. Repayments rise when sales rise and fall when they slump, which aligns the funder with the founder far more than a bank term loan does.
The appeal in Vietnam is practical. Banks lend mainly against land, buildings and guarantees, so a software or brand-led business with strong gross margins often cannot borrow what its cash flow supports. Equity is expensive and dilutive, and the Vietnamese venture market remains thin for growth-stage rounds.
A related structure, the royalty purchase, has the investor buy a share of the future royalty stream or product revenue attached to an asset such as a brand or a drug dossier. Both structures are contractual rather than statutory. Neither has a dedicated regime in Vietnamese law, so they must be fitted into existing categories: loan, capital contribution, business cooperation or licence.
Use Cases: SaaS, E-commerce, F&B and Pharma
Revenue-based financing works best where revenue is recurring, observable and not easily diverted. The sector shapes both the commercial terms and the legal risk.
SaaS and subscription software
Monthly recurring revenue is the ideal base. A funder can monitor billing data through the payment processor, and churn is measurable. The legal issues are who owns the code and whether the operating company holds the intellectual property. Many Vietnamese software groups develop in one entity and bill from another, or hold IP offshore, which complicates both the royalty analysis and the security package.
E-commerce and marketplace brands
Sales flow through marketplaces that pay out into seller accounts. Funders usually want a direction-to-pay over marketplace settlements or a controlled collection account. Inventory financing needs differ from software, and the percentage taken from revenue must leave enough gross margin to fund restocking.
F&B and consumer brands
Multi-outlet chains and packaged-goods brands can offer store-level or channel-level revenue. The valuable asset is the trademark and recipes or know-how. A royalty-style deal, where the funder takes a share of branded revenue, may be paired with a trademark licence. Franchise revenue is a natural fit but triggers the commercial franchise registration rules of the Law on Commerce and its guiding decree.
Pharma and healthcare products
Pharmaceutical companies hold marketing authorisations, registered trademarks and distribution rights. Revenue sharing on a product is conceivable, but the marketing authorisation holder carries regulatory responsibilities that cannot be transferred by contract alone, and pricing, import and distribution are regulated under the Law on Pharmacy. The funder should take a payment right, never control of the regulated licence.
Characterisation: Loan, Investment or Royalty Licence?
Vietnamese courts and tax authorities look at substance. The label in the term sheet, whether “revenue share”, “royalty” or “purchase of receivables”, will not bind them if the economics point elsewhere. Civil Code 2015 Article 124 also allows a transaction that disguises another to be treated as simulated, with the disguised transaction governed by its true nature. Three characterisations compete.
When revenue-based financing looks like a loan
The Civil Code defines a loan contract as one in which the lender transfers property to the borrower, who must return property of the same kind and quality when due, with interest where agreed.
If a revenue-based financing deal obliges the company to repay at least the principal, whatever its revenue, through a minimum payment, a guarantee by the founder, a fixed final date or an acceleration trigger that functions as a put, a Vietnamese judge is likely to treat it as a loan. The revenue percentage then becomes interest.
Revenue-contingent risk, that is, the funder genuinely losing money if revenue fails, is the strongest argument that it is not a loan, but a document that adds a floor erodes it quickly.
The unlicensed lending risk
The Law on Credit Institutions 2024 (Law No. 32/2024/QH15) reserves banking activities, including granting credit as a regular business, to licensed credit institutions, and the older 2010 law took the same line. Occasional intercompany lending between affiliates is tolerated in practice; systematically advancing money to many unrelated Vietnamese companies against a repayment right is a different matter and carries administrative and potentially criminal consequences.
A foreign or domestic funder running a fund that makes serial revenue-based advances should therefore avoid structures a regulator could describe as lending as a business. Whether a specific funder falls within the prohibition depends on facts and the current implementing decrees, so verify before closing.
Investment, business cooperation or licence
If the funder takes a share of profit or revenue and bears the commercial risk of the project, the arrangement may be a business cooperation contract under the Law on Investment 2020, which can be signed without forming a new entity. For a foreign funder that raises questions about investment registration and the approval of an investment in the project.
A true capital contribution to a limited liability company or joint stock company brings foreign ownership limits, registration of contributed capital and the usual governance rights, which defeats the point of a light-touch instrument.
The licence route, in which the company licenses a trademark, software or know-how to a funder-owned vehicle and receives a lump sum, produces genuine royalties, but it moves IP out of the company’s control and is rarely commercially acceptable beyond narrow product lines.
Interest-Rate Caps and Usury Exposure
Article 468 of the Civil Code caps contractual interest on loans between non-bank parties at 20% per year of the principal, unless another law provides otherwise. Interest above the cap is void as to the excess. Article 201 of the Criminal Code 2015 also penalises lending at interest more than five times the civil cap, that is, above 100% per year, in a way that is deemed usurious and results in serious consequences.
Applying the cap to revenue-based financing
Because revenue-based financing has an uncertain tenor, the implied annual rate depends on how quickly revenue grows. A funder that advances 10 and collects a 1.4x multiple over 18 months earns an annualised return of roughly 25%, above the civil ceiling if the arrangement is treated as a loan. A cap of 1.2x over three years would sit comfortably below it. For this reason, the legal drafting should do two things.
First, preserve the contingent character of repayment so the transaction stays outside the loan definition. Second, if there is a real prospect that the deal is recharacterised, include a savings clause reducing the effective return to the statutory maximum and making any excess a credit against principal. A savings clause does not guarantee a favourable result, but it limits the damage.
Banks and licensed credit institutions are subject to their own rate regime under the credit institution laws and are not caught by the 20% ceiling, which is one reason venture-style lenders in Vietnam often partner with a licensed institution.
IP Licence Registration and Royalty Withholding
Where the structure rests on a licence or an assignment of royalty rights, the Law on Intellectual Property 2005, as amended (most recently by Law No. 07/2022/QH15), governs. A licence of an industrial property object, such as a trademark, requires a written contract with prescribed content.
Recording the licence with the National Office of Intellectual Property under Decree 65/2023/ND-CP is generally not a condition of validity, but registration is what makes an industrial property licence effective against third parties. A funder that relies on a royalty stream tied to a licence should insist on registration, particularly if the licensee is an affiliate or the funder may later enforce directly against a sublicensee.
If know-how or technology crosses the border, the Law on Technology Transfer 2017 may require registration of the technology transfer contract, and royalty payments are often scrutinised for transfer pricing between related parties. Pay particular attention to whether the funder is a related party; Decree 132/2020/ND-CP applies to related party transactions and limits deductible interest in some cases.
Foreign contractor tax on royalties
Payments to a foreign funder fall under the foreign contractor tax regime of Circular 103/2014/TT-BTC (verify for later amendments). Royalties are generally subject to corporate income tax at a deemed rate of 10% of gross payment, and VAT treatment depends on the nature of the licensed right, with certain software and technology transfers outside VAT or exempt. Interest paid abroad attracts a lower withholding rate, generally 5%.
The same cash flow can therefore bear different withholding depending on whether it is classified as royalty, interest or a share of business profit. Double tax treaties may reduce the rate, but the treaty benefit requires a certificate of residence and often advance notification to the tax authority. A prudent term sheet includes a gross-up clause and states who bears the foreign contractor tax cost; the company, not the funder, usually ends up paying it.
Deductibility for the company
Whether royalties are deductible in computing the company’s corporate income tax depends on supporting documents and arm’s-length pricing. Payments characterised as a return on capital, in contrast, are not deductible. This is an additional reason why the characterisation analysis cannot be left to the end of the negotiation.
Offshore Funders and SBV Foreign Loan Rules
If the money comes from outside Vietnam and the arrangement is a loan, the Ordinance on Foreign Exchange, Decree 70/2014/ND-CP and Circular 03/2016/TT-NHNN regulate foreign borrowing by enterprises. A medium or long-term foreign loan, with a term over one year, must be registered with the State Bank of Vietnam, and the registration confirmation is needed before the borrower can open the loan account, draw down and remit repayments.
Short-term loans can also require registration when extended past one year. The loan must be disbursed and repaid through a designated foreign currency account at a licensed bank in Vietnam, and drawdown cannot precede registration. Unregistered foreign loans expose the borrower to administrative penalties and may block banks from processing remittances.
The SBV foreign loan framework matters for revenue-based financing because the central question, loan or not, is the same question the SBV asks. Funders who say their return is not interest, yet whose structure has a fixed repayment obligation, risk having the cross-border remittance refused by the bank as an unregistered loan.
Conversely, treating a genuine non-loan arrangement as a foreign loan and registering it can be both unnecessary and commercially awkward, since registration implies a fixed repayment schedule. Foreign exchange rules for direct investment and for business cooperation have their own capital account requirements. Confirm the correct route with the bank’s foreign exchange compliance team early, because their interpretation drives how quickly funds actually arrive.
Foreign exchange rules have been updated several times, so verify the current circular and decree before relying on this summary.
Caps, Multiples, Covenants and Reporting
Setting the cap and multiple
The principal commercial terms are the revenue share, the repayment cap and any minimum payment. Typical caps range from 1.3x to 2.0x of the advance, depending on risk and expected duration. The cap lets both sides compute total cost, but it also exposes the interest-rate analysis above, because a hard cap combined with a long-stop date converts the instrument into a term loan with a known yield.
Option features, such as a small equity warrant in addition to a lower cap, are used by some funders, but each added feature makes the instrument look more like a hybrid and complicates the tax analysis.
Covenants and information rights
Funders rely on information rather than collateral. Expect monthly reporting of revenue by channel, access to payment and marketplace dashboards, audit rights over revenue records, and a covenant that the company will not divert sales to affiliates, change its pricing model or discontinue the funded product line. Negative covenants commonly cover new debt, dividends and asset sales while the cap is unpaid.
In Vietnam, a covenant that purports to restrict the board’s powers under the Law on Enterprises 2020 operates only as a contractual undertaking, giving damages or acceleration but not a power to void corporate acts. Data protection also matters, because sharing customer-level billing data with an offshore funder engages Decree 13/2023/ND-CP on personal data protection and, from 2026, the Personal Data Protection Law, so share aggregated figures where possible.
Comparison with Venture Debt and Convertible Notes
Revenue-based financing sits between debt and equity. Founders should compare it directly with venture debt and convertible notes before choosing.
| Feature | Revenue-based financing | Venture debt | Convertible notes |
|---|---|---|---|
| Repayment | Percentage of revenue until cap | Fixed interest and amortisation | Converts to equity or repaid at maturity |
| Dilution | None or minimal (warrants optional) | Small, via warrants | Yes, on conversion |
| Vietnam legal status | No dedicated regime; risk of loan recharacterisation | Loan under the Civil Code; a licensed lender is needed if domestic | Private convertible bonds or loan with conversion option; foreign ownership limits apply on conversion |
| Interest cap risk | Applies if recharacterised | Applies for non-bank lenders | Applies to the debt portion |
| Offshore funder | Foreign loan registration if debt-like | Foreign loan registration required | Foreign loan registration, then investment registration on conversion |
| Security | Usually receivables, accounts, IP | Often all-asset | Typically unsecured |
| Best fit | Recurring-revenue, asset-light | Companies with an equity round behind them | Early rounds with valuation deferred |
In short, venture debt suits companies that have just closed an equity round and want runway. Convertible notes defer valuation but are awkward in Vietnam because domestic convertible instruments need a corporate bond or loan framework, and conversion by a foreign holder triggers foreign ownership and share purchase registration. A royalty purchase fits product-led businesses with an identifiable stream of branded revenue. Revenue-based financing is strongest where revenue is steady and the founders want to keep control.
Enforceability and Security
Revenue-based financing is unsecured by nature, so enforceability depends on what the funder can reach. Vietnamese law recognises pledges of receivables, rights to claim, deposit accounts and future property under the Civil Code and Decree 21/2021/ND-CP on security measures, and registration of the security interest at the national registry of secured transactions fixes priority.
A funder can also take security over IP rights such as trademarks and copyright, with registration of the pledge at the competent office. In practice, the most effective protection is control of the collection account: a blocked or direction-to-pay account at a Vietnamese bank into which marketplace and customer receipts flow.
Choice of law and forum need care. Vietnamese courts will usually apply Vietnamese law to a domestic company’s obligations, even if the contract chooses foreign law, where the transaction has no foreign element. A foreign funder with an offshore vehicle has a foreign element and can select Singapore or English law, and arbitration at SIAC or VIAC, with the New York Convention supporting enforcement in Vietnam.
The award, however, is only as good as the assets within reach. Under the Law on Bankruptcy 2014, unsecured creditors rank behind secured creditors, and ongoing revenue-share rights during insolvency may be treated as an ordinary claim. Founder guarantees add recourse but increase the risk of recharacterisation as a loan, so weigh them carefully.
Documenting a Revenue-Based Financing Deal: Founder Checklist
Founders who consider revenue-based financing should treat the term sheet as the start of a legal process, not the end of a commercial one. A short checklist helps keep the deal within Vietnamese law and protects the company’s future fundraising options.
Core Clauses in Revenue-Based Financing
The core clauses of revenue-based financing are the advance amount, the revenue share percentage, the repayment cap, the measurement of revenue and the term. Each of these must be defined carefully. If revenue-based financing is repaid from gross revenue, the definition should state which taxes, refunds and chargebacks are excluded; if it is repaid from net receipts, the founder should insist on a clear audit mechanism.
The agreement should also say what happens when revenue falls, because the main advantage of revenue-based financing is that payments flex with sales, and a floor payment or a minimum term can erase that advantage.
Security and Covenants in Revenue-Based Financing
Funders usually ask for security over receivables, accounts or intellectual property. In revenue-based financing, founders should negotiate the least intrusive package, such as a pledge over a collection account rather than all assets, and should avoid personal guarantees where possible. Covenants should be limited to information, use of funds and a restriction on diverting revenue to affiliates.
A covenant package that is lighter than a bank loan is part of what makes revenue-based financing attractive, so founders should resist terms that turn the deal into a conventional secured loan.
Exit, Default and Refinancing
The documents for revenue-based financing should state the consequences of a sale of the company, an equity round or an early repayment. Many funders require a minimum multiple on early repayment, and founders should understand how that multiple compares with the cost of alternative capital. Events of default should be narrow and should allow a cure period.
Finally, the founder should check how revenue-based financing will appear to later investors: a clear, capped and well-documented facility is easy to diligence, while an informal arrangement can delay a priced round.
When each of these points is addressed, revenue-based financing can be a practical, non-dilutive tool for Vietnamese growth companies with recurring revenue. Founders should still obtain Vietnamese legal and tax advice on the characterisation of the deal before signing, because the same revenue-based financing contract can be treated as a loan, an investment or a licence depending on its drafting.
Frequently Asked Questions
Is revenue-based financing legal in Vietnam?
No statute prohibits it. It is a contractual arrangement, so legality turns on characterisation. If repayment is effectively fixed, authorities may treat it as a loan, triggering interest caps, licensing and foreign loan rules.
Does the 20% interest cap apply to a revenue share?
Only if the deal is recharacterised as a loan under the Civil Code. Then interest above 20% per year is void as to the excess. Drafting should preserve contingent repayment and include a savings clause.
Do royalty payments to a foreign funder attract withholding tax?
Generally yes. Royalties paid abroad face foreign contractor tax, with corporate income tax commonly deemed at 10% of gross payment, subject to treaty relief. Interest is taxed differently, so classification matters.
Must an offshore revenue-based financing be registered with the SBV?
If it is a foreign loan with a term over one year, registration with the State Bank of Vietnam is required before drawdown. Non-loan structures follow other foreign exchange rules. Confirm with your bank early.
How is revenue-based financing different from venture debt?
Venture debt carries fixed interest and a maturity date, plus warrants. Revenue-based financing repays through a revenue percentage up to a cap, so payments flex with sales and there is usually no fixed maturity.
Revenue-based financing can give Vietnamese growth companies capital without dilution, but only if the term sheet is built around Vietnamese characterisation, tax and foreign exchange rules from day one. Your next step is to map your revenue streams, IP ownership and funder location, then test two or three structures against the loan, withholding and registration tests before you sign.
Talk to IVLF Advisors About Your Financing Structure
Our team advises on investment and finance structuring and banking and finance transactions in Ho Chi Minh City and Hanoi. Request a confidential preliminary consultation to assess your proposed deal, with no obligation.
Further reading: the State Bank of Vietnam publishes foreign exchange and foreign loan regulations, and the National Office of Intellectual Property handles licence registration.
This article provides general information only and is not legal, tax or financial advice. Laws and regulations change; please obtain advice specific to your circumstances before acting.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
